2012-10-26 06:09:08 - New Energy market report from Business Monitor International: "Germany Oil & Gas Report Q4 2012"

BMI View: For a country keen to wean itself off of fossil fuels, the decision to phase out nuclear energy represents a fresh and unwelcome challenge. Gas consumption seems certain to grow more quickly than expected as demand for power rises - until the energy void can be filled through the expansion of renewable sources. Refining capacity is being scaled back to do disappointing returns, so Germany must reduce its consumption of oil products in order to avoid becoming overly dependent on costly imports.

The main trends and developments we highlight in Germany's oil and gas sector are:


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* A group led by Macquarie Group in May 2012 agreed to pay EUR3.2bn to German utility

E.ON for a network of natural-gas pipelines in Germany. The price for Open Grid Europe, Germany's biggest gas transmission system, includes adjustments for pensions and other assets, E.ON said in a statement. The buyers include German reinsurer Munich Re, the Abu Dhabi Investment Authority and British Columbia Investment Management, E.ON said.
* The Federal Institute for Geosciences and Natural Resources (BGR) has issued a report which has upgraded Germany's shale gas potential to an estimated 6.8-22.6bn cubic metres (bcm) of reserves. The findings may have little impact on the parliamentary committee currently studying Germany's shale gas potential. The body is expected to report its findings before the end of 2012. The controversial hydraulic fracturing (fraccing) process has been in use in Germany at low levels since the 1990s, but increased public scrutiny has increased uncertainty over prospects for any large-scale effort to develop unconventional gas resources.
* US oil major ExxonMobil is to press ahead with the search for shale gas in Germany, and will also continue to launch conventional gas production initiatives, according to the company's head of Central European operations, Gernot Kalkoffen. This is despite doubts over the environmental impact of fraccing.
* The European Commission in August 2012 approved regulatory clearance for Gunvor Group's acquisition of the assets of the Petroplus refinery in Ingolstadt and related German marketing activities. The 100,000b/d plant is one of the best-performing European refineries, according to Gunvor, with a strong regional footprint in Germany's Bavaria region. Gunvor already trades the crude oils processed by the Ingolstadt refinery, it said, enabling greater efficiencies for the plant.
* Royal Dutch Shell is shortly to close its Harburg refinery following a fruitless search for a buyer. It will convert the main part of the facility into a fuels terminal. The base oil plant at the site will, however, be disassociated and sold to Nynas under a deal agreed in December 2011.
* Gas consumption now represents 23% of primary energy demand (PED), accounting for 11% of power generation. Its share of the power market is rising fast and gas demand should rise. Our forecast is for demand to rise from an estimated 97.9bcm in 2012 to 113.0bcm by 2016, then reaching 135bcm by 2021. Germany's gas production is forecast to fall from around 12.0bcm in 2012 to no more than 9.0bcm over the period, unless shale gas drilling activity is stepped up and delivers early results. End-period gas imports are currently forecast at 126bcm.
* The recent decision to eliminate nuclear power generation raises questions with regard to medium-term hydrocarbons use, with both oil and gas likely to have a larger-than-expected share of overall energy demand and power generation. BMI is assuming that oil consumption of 2.40mn b/d in 2012 will rise to 2.49mn b/d in 2016 and to 2.60mn b/d by 2021, requiring net imports of 2.51mn b/d by the end of the forecast period.

Crude imports will cost the government some US$81.0bn in 2016, compared with an estimated US$88.6bn in 2012. The cost of gas imports by 2016 is estimated at US$47.3bn, taking the total for combined crude oil and natural gas import costs to US$128.3bn. At the time of writing we assume an OPEC basket oil price for 2012 of US$107.05/bbl, falling to US$99.10/bbl in 2013.The assumptions for 2016 and 2021 are US$93.25 and US$91.50/bbl respectively.

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